The Isle of Man parliament, known as the Tynwald, is expected to vote on a
scheme to help compensate offshore savers with collapsed Icelandic bank
Kaupthing.

The Island is expected to spend up to £150m, which is half its disposable income or 7.5 per cent of GDP, to part-compensate savers with Kaupthing Singer & Friedlander Isle of Man.

A spokesman for the Tynwald said today that it would be “very unusual” for the Isle of Man Parliament to reject a scheme such as this, which has been proposed by the Government.

The government of the island of 81,000 people had to step in after its banks refused to foot the bill for raising the compensation limit from £15,000 to £50,000 in a law enacted a fortnight ago. However, the banks have now agreed to put up to £200m annually into the scheme.

Offshore savers with Kaupthing are not eligible for compensation under the UK’s Financial Services Compensation Scheme, and their deposits have not been transferred to Dutch bank ING Direct, unlike British Kaupthing Edge accounts.

An action group of almost 10,000 depositors with the offshore arm of Kaupthing are now campaigning for their money bank. They had about £840 million in their Kaupthing accounts, but only about £100 million of that remains on the Isle of Man. They are also lobbying the UK, which froze more than £590 million of the bank’s assets there, which precipitated the collapse of the bank.

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KS&F has had its banking licence revoked and is expected to be wound up in a court hearing tomorrow. A delegation of civil servants from the Isle of Man will meet Treasury officials and UK civil servants in London tomorrow to discuss the unfreezing of the reported £550 million of Isle of Man depositors’ assets that has been frozen in the UK.

Meanwhile, savers with Landsbanki in Guernsey still face losing hundreds of millions of pounds after investing offshore while working or retiring abroad. They do not normally qualify for compensation from the Financial Services Compensation Scheme (FSCS). They are not even part of the EU, so are not protected by any European safety nets.

Expats and pensioners believed their money was safe, having invested in banks with strong brands in the UK and elsewhere. Some of them opened accounts with the offshore arms of British building societies later acquired by Icelandic banks. Those with money in Guernsey and Jersey have no redress if they save with an institution that goes bust.